Search results matching tags 'crisis' and 'Credit'http://www.investorsinsight.com/search/SearchResults.aspx?a=1&o=DateDescending&tag=crisis,Credit&orTags=0Search results matching tags 'crisis' and 'Credit'en-USCommunityServer 2008.5 SP1 (Build: 31106.3070)Banking &amp; Finance Expected To Get Crushedhttp://www.investorsinsight.com/blogs/the_gold_and_oil_guy/archive/2020/04/17/banking-amp-finance-expected-to-get-crushed.aspxFri, 17 Apr 2020 14:43:00 GMT94e1e1ff-3922-415d-9584-19119299714b:9581ChrisVermeulen<p>Big news out today on CNBC about Gilead drug cured all 125 people from serious COVID-19 conditions within 5 days, This is amazing to hear, stocks are popping today up 3-5% which is to be expected for this type of news but the damage to the financial markets has already been done.</p>
<p>But early data recently published suggests the Banking and Finance sector may continue to get crushed under a massive weight of real losses and exposure to risk in the Derivatives Markets.&nbsp; As with the 2008-09 Credit Crisis, Derivatives losses extended compound risk factors by 10x to 20x or more for in some instances.&nbsp; We believe the banking and finance sector may be setting up for a massive implosion if global derivatives implode as leveraged accounts collapse.</p>
<p>Two very interesting news articles that may assist readers in understanding the current Financial market contagion event are:</p>
<p><strong>Bank Earnings Armageddon</strong>&nbsp;by&nbsp;<a href="https://www.theinstitutionalriskanalyst.com/post/bank-earnings-armageddon" target="_blank" rel="noreferrer noopener">TheInstitutionalRiskAnalyst.com</a></p>
<p><strong>Xi fears Japan-led manufacturing exodus from China</strong>&nbsp;by&nbsp;<a href="https://asia.nikkei.com/Editor-s-Picks/China-up-close/Xi-fears-Japan-led-manufacturing-exodus-from-China" target="_blank" rel="noreferrer noopener">Asia.Nikkei.com</a></p>
<p>The Chinese/Asian economy is built upon the premise that global demand will continue without interruption over the next many decades.&nbsp; Additionally, China and Asia have leveraged capital systems and financial functions by deploying a very shadowy measure of lending and banking functions.&nbsp; We&rsquo;ve all heard the stories of how collateral-based loans were offered many times over as stock in Copper or other raw materials were simply moved from one location to another to secure loans on the same material.</p>
<p>As with any great Ponzi scheme &ndash; it all starts to collapse when investors decide they don&rsquo;t want to play games any longer.</p>
<h3 class="has-text-align-center">FEDERAL RESERVE &ndash; RETAIL &amp; FOOD SERVICES SALES</h3>
<p>These recent St. Louis Federal Reserve charts paint a fairly clear picture that retail and food services sales have collapsed to below levels of 4+ years ago &ndash; and this is just getting started.</p>
<div class="wp-block-image"><img src="https://www.thetechnicaltraders.com/wp-content/uploads/2020/04/chart1-11-1024x412.png" class="wp-image-31458" width="901" height="362" alt="" /></div>
<h3 class="has-text-align-center">FEDERAL RESERVE &ndash; BORROWER DELINQUENCY RATE</h3>
<p>This next chart shows that sub-prime borrower delinquency rates have already peaked above both the 2000 and 2008-09 peak levels.&nbsp; The current virus event collapse is a completely different beast of destruction than what we&rsquo;ve experienced before.</p>
<div class="wp-block-image"><img src="https://www.thetechnicaltraders.com/wp-content/uploads/2020/04/chart2-11-1024x412.png" class="wp-image-31459" width="904" height="363" alt="" /></div>
<p>This is why we believe the Banking and Financial sectors are about to get hammered over the next 6+ months as a massive credit and debt deleveraging process continues to take place.&nbsp; Consumers recently displaced from the workforce will suddenly find themselves without the ability to pay their bills and credit card balances.&nbsp; This is not just happening in the US or select areas &ndash; this is happening throughout the world right now.&nbsp; Banking and Finance are staring into a black hole in terms of just how big and destructive the displacement of consumer jobs/earnings capacity really is.</p>
<p>We believe the recent recovery in the US stock market was a reactionary event prompted by the US Fed stepping in to &ldquo;stick their finger in the dike&rdquo; as an effort to thwart the downside price collapse.&nbsp; When the reality of the situation really begins to settle in about 60 days, banks and other financial institutions are going to have a difficult time explaining losses and exposure to derivatives risks that were clearly evident in March and April 2020.</p>
<p class="has-text-align-center"><em>Before we continue, be sure to&nbsp;<a rel="noreferrer noopener" href="https://www.thetechnicaltraders.com/free-market-forecast-newsletter/" target="_blank"><strong>opt-in to our free market trend signals</strong></a>&nbsp;</em><br /><em>before closing this page, so you don&rsquo;t miss our next special report!</em></p>
<h3 class="has-text-align-center">WEEKLY CHART &ndash; NASDAQ REGIONAL BANKING INDEX</h3>
<p>This first Weekly chart of the NASDAQ Regional Banking Index shows just how destructive the initial downside price move has been.&nbsp; Even though the US Fed stepped in with a massive $5+ trillion rescue plan, the recovery in this sector has been minor.&nbsp; We believe that is because most investors understand the true risks in this sector are likely in the hundreds of trillions range with derivatives and leveraged positions.</p>
<div class="wp-block-image"><img src="https://www.thetechnicaltraders.com/wp-content/uploads/2020/04/chart3-11.png" class="wp-image-31460" width="900" height="533" alt="" /></div>
<h3 class="has-text-align-center">UCC WEEKLY CHART &ndash; CONSUMER SERVICES SECTOR</h3>
<p>This UCC Weekly chart shows a bit more of a recovery after the US Fed stepped in to save the day.&nbsp; Yet, we fully believe a deeper price low is likely to set up as the full extent of total newly unemployed put additional strains on expectations.&nbsp; Consumers without income can suddenly collapse multiple trillions in credit/debt over a very short period of time.</p>
<div class="wp-block-image"><img src="https://www.thetechnicaltraders.com/wp-content/uploads/2020/04/chart4-6.png" class="wp-image-31461" width="900" height="533" alt="" /></div>
<h3 class="has-text-align-center">XLF FINANCIAL SECTOR WEEKLY CHART</h3>
<p>The XLF Financial Sector Weekly chart paints a very clear picture of the downside risks current in play.&nbsp; After a massive initial collapse, a brief sideways recovery has taken place.&nbsp; Yet the true risk for this sector takes place over the next 24+ months as these newly displaced workers attempt to manage with little or no income and attempt to satisfy debt levels that were acquired expecting pre-2020 income expectations.&nbsp; New cars, new homes, new credit card debt, new everything purchased on credit has suddenly become the beast that destroys the financial/banking sector.</p>
<div class="wp-block-image"><img src="https://www.thetechnicaltraders.com/wp-content/uploads/2020/04/chart5-2.png" class="wp-image-31462" width="903" height="537" alt="" /></div>
<h3 class="has-text-align-center">CONCLUDING THOUGHTS:</h3>
<p>Our researchers believe the true scope of this crisis won&rsquo;t be known for at least another 30 to 60+ days.&nbsp; The closer we get to the end of Q2, the more likely we are to see real data reflecting real risks in the Banking and Financial sectors.&nbsp;</p>
<p>Until we get a more accurate understanding of the risks, we feel it is much safer to assume the worst-case scenario going forward.&nbsp; There is simply no way to paint a positive picture when people throughout the globe are losing their jobs, incomes, and all sense of normalcy.&nbsp; The reality is that this disruption in the global banking and financial sector is certainly going to be a big one that could last many months or years and&nbsp;<a href="https://www.thetechnicaltraders.com/three-charts-every-trader-and-investor-must-see/" target="_blank" rel="noreferrer noopener"><strong><span>if you read this article or watch the video you will understand the magnitude of this market top</span></strong></a>&nbsp;that looks to be forming.</p>
<p>I have to toot my own horn here a little because subscribers and I had our trading accounts close at a new high watermark for our accounts. We not only exited the equities market as it started to roll over, but we profited from the sell-off in a very controlled way, and yesterday we locked in more profits with our SPY ETF trade on this bounce.</p>
<p>As a technical analyst and trader since 1997, I have been through a few bull/bear market cycles in stocks and commodities. I believe I have a good pulse on the market and timing key turning points for investing and short-term swing traders. 2020 is going to be an incredible year for skilled traders.&nbsp; Don&rsquo;t miss all the incredible moves and trade setups.&nbsp;</p>
<p>I hope you found this informative, and if you would like to get a pre-market video every day before the opening bell, along with my trade alerts. These simple to follow ETF swing trades have our trading accounts sitting at new high water marks yet again this week, not many traders can say that this year. Visit my&nbsp;<strong><a rel="noreferrer noopener" href="http://www.thetechnicaltraders.com/#trackrecord" target="_blank">Active ETF Trading Newsletter</a></strong>.</p>
<p>We all have trading accounts, and while our trading accounts are important, what is even more important are our long-term investment and retirement accounts. Why? Because they are, in most cases, our largest store of wealth other than our homes, and if they are not protected during a time like this, you could lose 25-50% or more of your entire net worth. The good news is we can preserve and even grow our long term capital when things get ugly like they are now and ill show you how and one of the best trades is one your financial advisor will never let you do because they do not make money from the trade/position.</p>
<p>If you have any type of retirement account and are looking for signals when to own equities, bonds, or cash, be sure to become a member of my&nbsp;<strong><a rel="noreferrer noopener" href="https://www.thetechnicaltraders.com/home/technical-investor/" target="_blank">Long-Term Investing Signals</a></strong>&nbsp;which we issued a new signal for subscribers.</p>
<p>Ride my coattails as I navigate these financial markets and build wealth while others lose nearly everything they own during the next financial crisis.</p>
<p>Chris Vermeulen<br />Chief Market Strategies<br />Founder of Technical Traders Ltd.</p>Gambling in the House?http://www.investorsinsight.com/blogs/thoughts_from_the_frontline/archive/2012/07/28/gambling-in-the-house.aspxSat, 28 Jul 2012 19:22:00 GMT94e1e1ff-3922-415d-9584-19119299714b:7035JohnMauldin<p><strong>There Is Gambling in the House? I Am Shocked&hellip; <br />Opacity and Credit Default Swaps <br />No Access for Spain <br />Denver, Maine, and Carlsbad</strong></p>
<p>Rick: How can you close me up? On what grounds? <br />Captain Renault: I&#39;m shocked, shocked to find that gambling is going on in here! <br />&ndash; From the classic scene in <i>Casablanca,</i>made in 1942</p>
<p>The latest scandal du jour seems to be about what is now called LIBORgate. But is it a scandal or is it really just business as usual? And if we don&rsquo;t know which it is, what does that say about how we organize the financial world, in which $300-800 trillion, give or take, is based on LIBOR? This is actually just the second verse of the old song about derivatives, which is a much larger market. Which of course is a problem that was not solved by Dodd-Frank and that has the potential to once again create true havoc with the markets, whereas LIBOR can only cost a few billion here and there. (Sarcasm intended.)</p>
<p>The problem is the lack of transparency. Why would banks want to reveal how much profit they are making? The last thing they want is transparency. This week I offer a different take on LIBOR, one which may annoy a few readers, but which I hope provokes some thinking about how we should organize our financial world.</p>
<h5>There Is Gambling in the House? I Am Shocked...</h5>
<p>Let&rsquo;s quickly look at what LIBOR is. The initials stand for London InterBank Offered Rate. It is the rate that is based on what 16 banks based in London (some are US banks) tell Thomson Reuters they expect to pay for overnight loans (and other longer loans). Thomson Reuters throws out the highest four numbers and the lowest four numbers and then gives us an average of the rest. Then that averaged number becomes about 150 other &ldquo;rates,&rdquo; from overnight to one year and in different currencies. The key is that the number is not what the banks actually paid for loans, it&rsquo;s what they <i>expect</i>to pay. Also, please note that the British Banking Association, on its official website, calls this a price &ldquo;fixing.&rdquo;</p>
<p>Most of the time the number is probably pretty close to real, or close enough for government work. But then, there are other times when it is at best a guess and at worst manipulated.</p>
<p>Back in the banking and credit crisis panic of 2008 the interbank market dried up. No bank was loaning other banks any money at any price. Thus there was clearly no way for the LIBOR number to be anything <i>but</i>fictitious. Anyone who was not aware of this was simply not paying attention.</p>
<p>The regulators certainly knew on both sides of the Atlantic. All along there were clear records, we now learn, that bankers were telling the FSA (the Financial Services Authority) that they had problems. Regulators were worried about what was happening but were pointing out that there was a large hole in the ship that was already admitting water, and they didn&rsquo;t want to make it any bigger. Timothy Geithner, then President of the New York Federal Reserve Bank (and now Secretary of the Treasury) wrote a rather pointed letter to the FSA, suggesting the need for better practices.</p>
<p>Some banks reported lower rates, to make it appear they were better off than they were (since no one was actually lending to them), and others might have given higher rates, for other reasons. Remember, this was a British Banking Association number. Whether you personally won or lost money on the probably wrong price information depends on whether you were lending or borrowing and whether you really wanted the entire market to appear worse than it already was.</p>
<p>This was the equivalent of an open-book test where you got to grade your own paper. And we are supposed to be shocked that there might have been a few bad&ldquo;expectations&rdquo; here and there by bankers acting in their own self-interest, with the knowledge of the regulators? The more amazing proposition would be that in a time of crisis the number had any close bearing on reality to begin with. Call me skeptical, but I fail to see how we should be surprised.</p>
<p>The larger question that really needs to be asked is how in the name of all that is holy did we get to a place where we base hundreds of trillions of dollars of transactions worldwide on a number whose provenance is not clearly transparent. Yes, I get that the methodology of the creation of the number <i>after</i> the banks call in their&ldquo;expectations&rdquo; is clear, but the process of getting to that number was evidently not well understood and looks to be even muddier than my rather cynical previous understanding of it.</p>
<p>It now seems that there will be a feeding frenzy as politicians and regulators hammer the various banks for improper practices. And they are pretty easy targets: there is just no way you can explain this that does not sound bad. </p>
<p>You&rsquo;re a big banker. The world is falling down before your eyes. No one trusts anyone. If you put out a bad number (whatever &ldquo;bad&rdquo; means in a time of sheer utter blind panic) the markets will kill you even more than they already are and you could lose your job. You have got to come up with a number in ten minutes.</p>
<p>&ldquo;Hey, Nigel, what do you think we should tell Tommie [Thomson Reuters]?&rdquo; </p>
<p>&ldquo;I don&rsquo;t know, Winthorpe, maybe Mortimer has an idea; let&rsquo;s ask him.&rdquo;</p>
<p> <script language=JavaScript src=http://stats.adclickz.net/abm.aspx?z=32></script> </p>
<p>Simply fining a few bankers is not going to fix the larger problem: the lack of transparency for arguably the most important number in financial markets. A very clear methodology needs to be developed, along with guidelines for what to do in times of crisis when the interbank market is frozen and there really is no number. Having no number might be worse than having a number that is a guess. But having a number that can be fudged by banks for their benefit is also clearly not in the public&rsquo;s interest.</p>
<p>The point of the rule of law is that it is supposed to level the playing field. But the rule of law means having a very transparent process with very clear rules and guidelines and penalties for breaking the rules.</p>
<p>I had dinner with Dr. Woody Brock this evening in Rockport. We were discussing this issue and he mentioned that he had done a study based on analysis by an institution that looks at all sorts of &ldquo;fuzzy&rdquo; data, like how easy it is to start a business in a country, corporate taxes and business structures, levels of free trade and free markets, and the legal system. It turned out that the trait that was most positively correlated with GDP growth was strength of the rule of law. It is also one of the major factors that Niall Ferguson cites in his book <i>Civilization</i> as a reason for the ascendency of the West in the last 500 years, and a factor that helps explain why China is rising again as it emerges from chaos.</p>
<p>One of the very real problems we face is the growing feeling that the system is rigged against regular people in favor of &ldquo;the bankers&rdquo; or the 1%. And if we are honest with ourselves, we have to admit there is reason for that feeling. Things like LIBOR are structured with a very real potential for manipulation. When the facts come out, there is just one more reason not to trust the system. And if there is no trust, there is no system.</p>
<h5>Opacity and Credit Default Swaps</h5>
<p>Which brings me to my next point. We just went through a crisis where derivatives were a major part of the problem, and specifically the counterparty risk of over-the counter (OTC) derivatives. </p>
<p>Taxpayers had to back-stop derivatives sold by banks (and specifically AIG) that were clearly undercapitalized. That cost tens of billions. Yet the commissions and bonuses paid for selling those bad derivatives went on being paid. Congress held hearings and expressed outrage, but in the end Dodd-Frank sold out. </p>
<p>&ldquo;Efforts to create an exchange-traded futures contract tied to credit-default swaps haven&#39;t yet gained traction after 18 months of talks, but banks dealing in the private multitrillion-dollar market for credit derivatives believe such contracts will eventually appear for a simple reason: They should attract new players. </p>
<p>&ldquo;Credit-default swaps function like insurance for bonds and loans. Investors use them to hedge or speculate against changes in a borrower&#39;s creditworthiness. If a borrower defaults, sellers of the protection compensate buyers. </p>
<p>&ldquo;The swaps &ndash; traded over the phone or on-screen, with prices known only to trading partners &ndash; are the domain of asset managers and hedge funds with the sophistication and financial wherewithal to take on complex risks. </p>
<p>&ldquo;Futures, by contrast, are more routine instruments used by institutions and individual or &quot;retail&quot; investors. Futures prices are displayed publicly on exchanges, and customers can trade them directly with other customers &ndash; unlike in the swaps market, where a dealer is on one side of every trade. </p>
<p>&ldquo;Dealers have long been fiercely protective of keeping the status quo in credit-default swaps or &lsquo;CDS&rsquo; because they have booked fat profits from customers not being able to see where other customers are trading.&rdquo;(Market Watch)</p>
<p>And that is the issue. Bankers do not want transparency, because it will seriously cut into their profits. And while I like everyone to make a profit, the implicit partner in every trade is the taxpayer and, last time I looked, we do not get a piece of that trade. Derivatives traded on an exchange were not part of the problem during the last credit crisis; OTC derivatives were.</p>
<p>An exchange makes it very clear where the counterparty risk is and what the price mechanism is. It creates a transparent rule of law and places the risk on the backs of those buying and selling derivatives and not on the taxpayer. Exchange-traded derivatives do not pose a potential threat to the economies of the world, while we don&rsquo;t know the extent of the threat posed by OTC trades. JPMorgan has lost around $6 billion on the trading of their &ldquo;London Whale.&rdquo; If Jamie Dimon and the JPM board couldn&rsquo;t guarantee reasonable corporate governance, then why should we assume that in another crisis we won&rsquo;t find another AIG?</p>
<p>Dodd-Frank needs to be repealed and replaced. The last time, the process was too clearly in the hands of those being regulated and has contributed to their profits. Enough already. </p>
<p>Credit default swaps and any other derivative large enough to put the system at risk must be moved to an exchange, to make clear the counterparty risks.</p>
<h5>No Access for Spain</h5>
<p>Let me close the letter by noting that Spain has clearly lost access to the bond market, absent intervention by the rest of Europe and more specifically the ECB. Spanish 10-year rates jumped over 7.5%. Then Super Mario Draghi said that the ECB would do whatever it takes to defend the euro, and the market rebounded. Why this was news is not clear, but sometimes the market just needs some hand holding.</p>
<p>Now the ECB is going to be forced to follow through or face a rather violent market correction downward. It will be interesting to see how long the markets will exhibit patience without a clear program from the ECB, while Germany would of course prefer that nothing is done until after its Constitutional Court ruling on September 2. </p>
<p>We are getting closer to the moment when European leaders will be forced to act. Spain is going to need a bailout and not just of its banks. Germany and the other northern-tier nations have not yet agreed on a path. </p>
<p>We will delve further into Europe over the next few weeks. The situation is getting increasingly problematic. There is no plan, and the eurozone lurches from crisis to crisis. One country after another is falling into recession and then depression. Austerity without default (or monetization, default&rsquo;s cousin) produces misery.</p>
<p>I think France is likely to be downgraded within a few months, putting Germany, the Netherlands, and Finland in a very difficult position. Will they put their own balance sheets and ratings at risk? Because that is what will be needed if the eurozone is to hang together. Stay tuned.</p>
<h5>Denver, Maine, and Carlsbad</h5>
<p>I am in Gloucester, Massachusetts tonight, spending the night in the museum that my economist friend Woody Brock calls his summer home, which is almost hidden at the end of a dirt road and surrounded by trees and enormous granite rocks. The grounds of the estate are an old granite quarry, itself a work of art, with massive, gorgeous works in stone intermingled among the trees and magnificently lit up at night. The quarry lakes are crystal clear, and the reflections of the trees, stone, and profuse flowers blend together like something out of an epic fantasy. It almost makes me want to grow up and become an economist, if they live like this.</p>
<p>Gloucester is an old fishing town and where the movie <i>The Perfect Storm</i> was based. Woody drove me around and showed me the home where he grew up, and where his sister and her husband still live. The town is an interesting contrast to Newport, where the really rich from New York built huge mansions and sailed their yachts. The summer homes of Gloucester are wonderful, fitted into the land and, for the most part, with a real family feel to them.</p>
<p>I was in Newport for the past week for a symposium on behalf of the Department of Defense. The Net Assessment Office brought together the most eclectic, diverse group of people I have ever been associated with to develop some alternative scenarios for the purpose of thinking about what might be needed in the future. My mind is still reeling. I am processing what I learned and will write about it at some point.</p>
<p>Interestingly, for me, some past worries about potential problem areas were laid to rest and other areas became of more concern. Five straight days of early mornings and late nights have me a little tired &ndash; thus the short letter tonight.</p>
<p>I head back to Dallas tomorrow and then back out on Monday afternoon for Denver, to be with my Altegris Investments partners at <i>Financial Advisor</i> magazine&#39;s Innovative Alternative Strategies Conference. I&rsquo;ll then fly back Tuesday evening, only to turn around and fly to New York and then on to Maine with my son Trey, for the annual &ldquo;Shadow Fed&rdquo; fishing trip run by David Kotok. There will be so many good friends there again. I think this will be the sixth year Trey and I have gone. David Rosenberg will be there, as will Barry Ritholtz <i>(The Big Picture),</i> Martin Barnes, John Silvia (chief economist at Wells) and the usual Fed types. Quite the cast of characters. Bloomberg TV (Mike McKee) will be there, and I am scheduled for an early hit with Tom Keene and perhaps a comment or two on the employment number on Friday morning.</p>
<p>Then I am home for a few weeks, before heading out to Carlsbad, California, to be at an important Casey Research conference called Navigating the Politicized Economy. It has quite the speaker line-up and would be a great way to kick off your fall thought process. You can learn more at <a href="http://www.caseyresearch.com/V-2012-fall-summit?ppref=JMD459EM0712A">http://www.caseyresearch.com/V-2012-fall-summit</a>.</p>
<p>It&rsquo;s time again to hit the send button. Have a great week. And having thought of <i>Trading Places</i> tonight (maybe my favorite movie), I think I will go buy the DVD and watch it one more time! </p>
<p>Your &ldquo;feeling good, Louis&rdquo; analyst,</p>
<p><em>John Mauldin</em></p>
<p><a href="mailto:subscribers@mauldineconomics.com">subscribers@mauldineconomics.com</a></p>Preparing for a Credit Crisishttp://www.investorsinsight.com/blogs/thoughts_from_the_frontline/archive/2011/09/10/preparing-for-a-credit-crisis.aspxSat, 10 Sep 2011 20:33:00 GMT94e1e1ff-3922-415d-9584-19119299714b:6369JohnMauldin<p><strong>The Consequences of Austerity <br />Euro Break-Up &ndash; The Consequences <br />Welcome to the Hotel California <br />The Slow March to Recession in the US <br />Preparing for a Credit Crisis <br />What Can You Do About the Weather? <br />Europe, Houston, New York, and South Africa</strong></p>
<p><i>&ldquo;I am sure the Euro will oblige us to introduce a new set of economic policy instruments. It is politically impossible to propose that now. But some day there will be a crisis and new instruments will be created.&rdquo;</i></p>
<p>- <i>Romano Prodi, EU Commission President, December 2001</i></p>
<p>Prodi and the other leaders who forged the euro knew what they were doing. They knew a crisis would develop, as Milton Friedman and many others had predicted. They accepted that as the price of European unity. But now the payment is coming due, and it is far larger than they probably thought.</p>
<p>This week we turn our eyes first to Europe and then the US, and ask about the possibility of a yet another credit crisis along the lines of late 2008. I then outline a few steps you might want to consider now rather than waiting until the middle of a crisis. It is possible we can avoid one but, as I admit, whether we do (and the extent of such a crisis) depends on the political leaders of the developed world (the US, Europe, and Japan) making the difficult choices and doing what is necessary. And in either case, there are some areas of investing you clearly want to avoid. Finally, I turn to that watering-hole favorite, the weather, and offer you a window into the coming seasons. Can we catch a break here? There is a lot to cover, so we will jump right in.</p>
<h5><strong>The Consequences of Austerity</strong></h5>
<p>The markets are pricing in an almost 100% certainty of a Greek default (OK, actually 91%), and the rumors in trading circles of a default this weekend by Greece are rampant. Bloomberg (and everyone else) reported that Germany is making contingency plans for the default. Of course, Greece has issued three denials today that I can count. I am reminded of that splendid quote from the British &rsquo;80s sitcom, <i>Yes, Prime Minister</i>: &ldquo;Never believe anything until it&rsquo;s been officially denied.&rdquo;</p>
<p>Germany is assuming a 50% loss for their banks and insurance companies. Sean Egan (head of very reliable bond-analyst firm Egan-Jones) thinks the ultimate haircut will be closer to 90%. And that is just for Greece. More on the contagion factor below.</p>
<p>&ldquo;The existence of a &lsquo;Plan B&rsquo; underscores German concerns that Greece&rsquo;s failure to stick to budget-cutting targets threatens European efforts to tame the debt crisis rattling the euro. German lawmakers stepped up their criticism of Greece this week, threatening to withhold aid unless it meets the terms of its austerity package, after an international mission to Athens suspended its report on the country&rsquo;s progress.</p>
<p>&ldquo; &lsquo;Greece is &ldquo;on a knife&rsquo;s edge,&rdquo;&rsquo; German Finance Minister Wolfgang Schaeuble told lawmakers at a closed-door meeting in Berlin on Sept. 7, a report in parliament&rsquo;s bulletin showed yesterday. If the government can&rsquo;t meet the aid terms, &lsquo;it&rsquo;s up to Greece to figure out how to get financing without the euro zone&rsquo;s help,&rsquo; he later said in a speech to parliament.</p>
<p>&ldquo;Schaeuble travelled to a meeting of central bankers and finance ministers from the Group of Seven nations in Marseille, France, today as they face calls to boost growth amid increasing threats from Europe&rsquo;s debt crisis and a slowing global recovery.&rdquo; (Bloomberg: see <a href="http://www.bloomberg.com/news/2011-09-09/germany-said-to-prepare-plan-to-aid-country-s-banks-should-greece-default.html">http://www.bloomberg.com/news/2011-09-09/germany-said-to-prepare-plan-to-aid-country-s-banks-should-greece-default.html</a>)</p>
<p>(There is an over/under betting pool in Europe on whether Schaeuble remains as Finance Minister much longer after this weekend&rsquo;s G-7 meeting, given his clear disagreement with Merkel. I think I take the under. Merkel is tough. Or maybe he decides to play nice. His press doesn&rsquo;t make him sound like that type, though. They are playing high-level hardball in Germany.)</p>
<p>Anyone reading my letter for the last three years cannot be surprised that Greece will default. It is elementary school arithmetic. The Greek debt-to-GDP is currently at 140%. It will be close to 180% by year&rsquo;s end (assuming someone gives them the money). The deficit is north of 15%. They simply cannot afford to make the interest payments. True market (not Eurozone-subsidized) interest rates on Greek short-term debt are close to 100%, as I read the press. Their long-term debt simply cannot be refinanced without Eurozone bailouts.</p>
<p>Was anyone surprised that the Greeks announced a state fiscal deficit of &euro;15.5 billion for the first six months of 2011, vs. &euro;12.5 billion during the same period last year? What else would you expect from increased austerity? If you reduce GDP by as much as Greece attempted to do, OF COURSE you get less GDP and thus lower tax revenues. You can&rsquo;t do it at 5% a year, as I have pointed out time and time again. These are the consequences of allowing debt to get too high. It is the Endgame.</p>
<p>[Quick sidebar: If (when) the US goes into recession, have you thought about what the result will be? A recession of course means lower GDP, which will mean higher unemployment. That will increase costs due to increased unemployment and other government aid, and of course lower revenues as tax receipts (revenues) go down. Given the projections and path we are currently on, that means even higher deficits than we have now. If Obama has his plan enacted, and if we go into a recession, we will see record-level deficits. Certainly over $1.5 trillion, and depending on the level of the recession, we could scare $2 trillion. Think the Tea Party will like that? Governments have less control than they think over these things. Ask Greece or any other country in a debt crisis how well they predicted their budgets.]</p>
<p>The Greeks were off by over 25%. And they are being asked to further cut their deficit by 4% or so every year for the next 3-4 years. That guarantees a full-blown depression. And it also means lower revenues and higher deficits, even at the reduced budget levels, which means they get further away from their goal, no matter how fast they run. They are now in a debt death spiral. There is no way out, short of Europe simply bailing them out for nothing, which is not likely.</p>
<p>Europe is going to deal with this Greek crisis. The problem is that this is the beginning of a string of crises and not the end. They do not appear, at least in public, to want to deal with the systemic problem of too much debt in all the peripheral countries.</p>
<p>Without ECB support, the interest rates that Italy and Spain would be paying would not be sustainable. I can see a path for Italy (not a pretty one, but a path nonetheless) but Spain is more difficult, given the weakness of its banks and massive private debt. These are economies that matter.</p>
<p>How do they get out of this without a debt crisis on the scale of 2008? By coming to grips with the problem. Germany is apparently doing that this weekend, by preparing to use the money it was going to pour into Greece to shore up its own banks. That is a much better plan. But as a well-researched report (by Stephane Deo, Paul Donovan, and Larry Hathaway in the London office &ndash; kudos, guys!) from UBS shows, solving the problem will be very costly. The next few paragraphs are from their introduction.</p>
<h5><strong>Euro Break-Up &ndash; The Consequences</strong></h5>
<p>&ldquo;<b>The Euro should not exist (like this)</b></p>
<p>&ldquo;Under the current structure and with the current membership, the Euro does not work. Either the current structure will have to change, or the current membership will have to change.</p>
<p>&ldquo;<b>Fiscal confederation, not break-up</b></p>
<p>&ldquo;Our base case with an overwhelming probability is that the Euro moves slowly (and painfully) towards some kind of fiscal integration. The risk case, of break-up, is considerably more costly and close to zero probability. Countries cannot be expelled, but sovereign states could choose to secede. However, popular discussion of the break-up option considerably underestimates the consequences of such a move.</p>
<p>&ldquo;<b>The economic cost (part 1)</b></p>
<p>&ldquo;The cost of a weak country leaving the Euro is significant. Consequences include sovereign default, corporate default, collapse of the banking system and collapse of international trade. There is little prospect of devaluation offering much assistance. We estimate that a weak Euro country leaving the Euro would incur a cost of around &euro;9,500 to &euro;11,500 per person in the exiting country during the first year. That cost would then probably amount to &euro;3,000 to &euro;4,000 per person per year over subsequent years. That equates to a range of 40% to 50% of GDP in the first year.</p>
<p>&ldquo;<b>The economic cost (part 2)</b></p>
<p>&ldquo;Were a stronger country such as Germany to leave the Euro, the consequences would include corporate default, recapitalization of the banking system and collapse of international trade. If Germany were to leave, we believe the cost to be around &euro;6,000 to &euro;8,000 for every German adult and child in the first year, and a range of &euro;3,500 to &euro;4,500 per person per year thereafter. That is the equivalent of 20% to 25% of GDP in the first year. In comparison, the cost of bailing out Greece, Ireland and Portugal entirely in the wake of the default of those countries would be a little over &euro;1,000 per person, in a single hit.</p>
<p>&ldquo;<b>The political cost</b></p>
<p>&ldquo;The economic cost is, in many ways, the least of the concerns investors should have about a break-up. Fragmentation of the Euro would incur political costs. Europe&rsquo;s &lsquo;soft power&rsquo; influence internationally would cease (as the concept of &lsquo;Europe&rsquo; as an integrated polity becomes meaningless). It is also worth observing that almost no modern fiat currency monetary unions have broken up without some form of authoritarian or military government, or civil war.&rdquo;</p>
<p><script language=JavaScript src=http://stats.adclickz.net/abm.aspx?z=32></script> </p>
<h5><strong>Welcome to the Hotel California</strong></h5>
<p>Welcome to the Hotel California <br />Such a lovely place <br />Such a lovely face <br />They livin&rsquo; it up at the Hotel California <br />What a nice surprise, bring your alibis <br />Last thing I remember, I was running for the door <br />I had to find the passage back to the place I was before <br />&ldquo;Relax,&rdquo; said the night man, &ldquo;We are programmed to receive. <br />You can check out any time you like, but you can never leave!&rdquo;</p>
<p>- The Eagles, 1977</p>
<p>You can disagree with the UBS analysis in various particulars, but what it shows is that there is no free lunch. It is not a matter of pain or no pain, but of how much pain and how is it shared. And to make it more difficult, breaking up may cost more than to stay and suffer, for both weak and strong countries. There are no easy choices, no simple answers. Like the Hotel California, you can check in but you can&rsquo;t leave! There are simply no provisions for doing so, or even for expelling a member.</p>
<p>The costs of leaving for Greece would be horrendous. But then so are the costs of staying. Choose wisely. Quoting again from the UBS report:</p>
<p>&ldquo;&hellip; the only way for a country to leave the EMU in a legal manner is to negotiate an amendment of the treaty that creates an opt-out clause. Having negotiated the right to exit, the Member State could then, and only then, exercise its newly granted right. While this superficially seems a viable exit process, there are in fact some major obstacles.</p>
<p>&ldquo;Negotiating an exit is likely to take an extended period of time. Bear in mind the exiting country is not negotiating with the Euro area, but with the entire European Union. All of the legislation and treaties governing the Euro are European Union treaties (and, indeed, form the constitution of the European Union). Several of the 27 countries that make up the European Union require referenda to be held on treaty changes, and several others may choose to hold a referendum. While enduring the protracted process of negotiation, which may be vetoed by any single government or electorate, the potential secessionist will experience most or all of the problems we highlight in the next section (bank runs, sovereign default, corporate default, and what may be euphemistically termed &lsquo;civil unrest&rsquo;).&rdquo;</p>
<p>Leaving abruptly would result in a lengthy bank holiday and massive lawsuits and require the willingness to simply thumb your nose in the face of any European court, as contracts of all sorts would have to be voided. The Greek government would have to &ldquo;conveniently&rdquo; pass a law that would require all Greek businesses to pay back euro contracts in the &ldquo;new drachma,&rdquo; giving cover to their businesses, who simply could not find the euros to repay. But then, what about business going forward?</p>
<p>Medical supplies? Food? &ndash; the basics? You have to find hard currencies for what you don&rsquo;t produce in the country. Greece is not energy self-sufficient, importing more than 70% of its energy needs. They have a massive trade deficit, which would almost disappear, as who outside of Greece would want the &ldquo;new drachma?&rdquo; Banking? Parts for boats and business equipment? The list goes on and on. Commerce would slump dramatically, transportation would suffer, and unemployment would skyrocket.</p>
<p>If Germany were to leave, its export-driven economy would be hit very hard. It is likely that the &ldquo;new mark&rdquo; would appreciate in value, much like the Swiss Franc, making exports from Germany even more costly. Not to mention potential trade barriers and the serious (and probably lengthy) recession that many of their export and remaining Eurozone trade partners would be thrown into. And German banks, which have loaned money in euros, would have depreciating assets and would need massive government support. (Just as they do now!)</p>
<p>Can a crisis be avoided? Yes. But that does not mean there will be no pain. We can avoid a debt debacle in the US, but doing so will mean reducing debt every year for 5-6 years in the teeth of a slow-growth economy and high unemployment. It will require enormous political will and mean many people will be unemployed longer and companies will be lost.</p>
<p>Ray Dalio and his brilliant economics team at Bridgewater have done a series of reports on a plan for Europe. Basically, it involves deciding which institutions must be saved (and at what cost) and letting the rest simply go their own way. If they are bankrupt, then so be it. Use the capital of Europe to save the important institutions (not shareholders or bondholders). Will they do it? Maybe.</p>
<p>The extraordinarily insightful and brilliant John Hussman recently wrote on a similar theme. He is a must-read for me. Quoting:</p>
<p>&ldquo;The global economy is at a crossroad that demands a decision &ndash; whom will our leaders defend? One choice is to defend bondholders &ndash; existing owners of mismanaged banks, unserviceable peripheral European debt, and lenders who misallocated capital by reaching for yield and fees by making mortgage loans to anyone with a pulse. Defending bondholders will require forced austerity in government spending of already depressed economies, continued monetary distortions, and the use of public funds to recapitalize poor stewards of capital. It will do nothing for job creation, foreclosure reduction, or economic recovery.</p>
<p>&ldquo;The alternative is to defend the public by focusing on the reduction of unserviceable debt burdens by restructuring mortgages and peripheral sovereign debt, recognizing that most financial institutions have more than enough shareholder capital and debt to <em>their own</em> bondholders to absorb losses without hurting customers or counterparties &ndash; but also recognizing that properly restructuring debt will wipe out many existing holders of mismanaged financials and will require a transfer of ownership and recapitalization by better stewards. That alternative also requires fiscal policy that couples the willingness to accept larger deficits in the near term with significant changes in the trajectory of long-term spending.</p>
<p>&ldquo;In game theory, there is a concept known as &lsquo;Nash equilibrium&rsquo; (following the work of John Nash). The key feature is that the strategy of each player is optimal, given the strategy chosen by the other players. For example, &lsquo;I drive on the right / you drive on the right&rsquo; is a Nash equilibrium, and so is &lsquo;I drive on the left / you drive on the left.&rsquo; Other choices are fatal.</p>
<p>&ldquo;Presently, the global economy is in a low-level Nash equilibrium where consumers are reluctant to spend because corporations are reluctant to hire; while corporations are reluctant to hire because consumers are reluctant to spend. Unfortunately, simply offering consumers some tax relief, or trying to create hiring incentives in a vacuum, will not change this equilibrium because it does not address the underlying problem. Consumers are reluctant to spend because they continue to be overburdened by debt, with a significant proportion of mortgages underwater, fiscal policy that leans toward austerity, and monetary policy that distorts financial markets in a way that encourages further misallocation of capital while at the same time starving savers of any interest earnings at all.</p>
<p>&ldquo;We cannot simply shift to a high-level equilibrium (consumers spend because employers hire, employers hire because consumers spend) until the balance sheet problem is addressed. This requires debt restructuring and mortgage restructuring. While there are certainly strategies (such as property appreciation rights) that can coordinate restructuring without public subsidies, large-scale restructuring will not be painless, and may result in market turbulence and self-serving cries from the financial sector about &lsquo;global financial meltdown.&rsquo; But keep in mind that the global equity markets can lose $4-8 <em>trillion</em> of market value during a normal bear market. To believe that bondholders simply cannot be allowed to sustain losses is an absurdity. Debt restructuring is the best remaining option to treat a spreading cancer. Other choices are fatal.&rdquo;</p>
<p>See (<a href="http://hussmanfunds.com/wmc/wmc110905.htm">http://hussmanfunds.com/wmc/wmc110905.htm</a> for the rest of the article.)</p>
<p>You think the world&rsquo;s central banks and main institutions are not worried? They are pulling back from bank debt in Europe, as are US money-market funds. (Note: I would check and see what your money-market funds are holding &ndash; how much European bank debt and to whom? While they are reportedly reducing their exposure, there is some $1.2 trillion still in euro-area institutions that have PIIGS exposure.)</p>
<p>Look at the following graph from the St. Louis Fed. It is the amount of deposits at the US Fed from foreign official and international accounts, at rates that are next to nothing. It is higher now than in 2008. What do they know that you don&rsquo;t?</p>
<p><a href="http://research.stlouisfed.org/fred2/graph/?s%5B1%5D%5Bid%5D=WLRRAFOIAL"><img height="360" width="600" src="http://images.johnmauldin.com/uploads/charts/090911-01.jpg" alt="Graph of Factors Absorbing Reserve Funds - Reverse Repurchase Agreements - Foreign Official and International Accounts" border="0" /></a></p>
<h5><strong>The Slow March to Recession in the US</strong></h5>
<p>Until there is a real crisis in Europe, the US will continue on its path of slower growth. Economists who base their projections on past history will not see this coming. Analysts who base their earnings estimates on recent performance are going to miss it (again.) Note: analysts, as I have written numerous times in this letter, are so very, very bad as a group at predicting future earnings that I am amazed people pay attention to them; but they seemingly do. They consistently miss tops and bottoms. That is the one thing they are very good at.</p>
<p>John Hussman, in the same report, offers the chart below, which is a variant on themes I have highlighted in past issues, but with his own personal twist. It is a combination of four Fed indices and four ISM reports. And it has been reliable as a predictor of recessions &ndash; one of which it strongly suggests we are either in or heading into.</p>
<p><img height="480" width="591" src="http://images.johnmauldin.com/uploads/charts/090911-02.jpg" alt="http://hussmanfunds.com/wmc/wmc110905a.gif" border="0" /></p>
<p>And recent revisions to economic data suggest that companies are going to have even more trouble making those powerhouse earnings that are being estimated. As Albert Edwards of Societe Generale reports this week:</p>
<p>&ldquo;&hellip; at the start of 2011, productivity trends took a remarkable turn for the worse &ndash; especially compared to what was initially reported. An initial estimate that Q1 productivity grew by 1.8% was transformed to show a decline of 0.6%. A slight 0.7% rise in Q1 ULC (unit labor costs) was transformed to show a staggering surge of 4.8%! In addition to that 4.8% rise, ULC rose a further 2.2% in Q2. But the news gets even worse Last week the BLS revised the ULC rise in Q2 up from 2.2% to 3.3% QoQ. US non-farm business unit labor costs are now rising by 2% yoy. That is very bad news for profits. Bad news for equities. And because the pace of ULC is a key driver of inflation (upwards in this instance), it is bad news for an increasingly criticized and divided Fed.&rdquo;</p>
<h5><strong>Preparing for a Credit Crisis</strong></h5>
<p>There is so much that could push us into another 2008 Lehman-type credit crisis. As I say, it is not a given, but the possibility should be on your radar screen. Lehman may have been the straw that broke the camel&rsquo;s back, but there were a lot of other problems. Prior to 2008, we had seen several large companies in the financial world simply disappear. REFCO comes to mind. Not a whimper in the markets. But Lehman was one of a dozen problems all over the world resulting from the larger subprime crisis. Howard Marks of Oaktree writes about simultaneous problems in the markets and what happens:</p>
<p>&ldquo;Markets usually do a pretty good job of coping with problems one at a time. When one arises, analysts analyze and investors reach conclusions and calmly adjust their portfolios. But when there&rsquo;s a confluence of negative events, the markets can become overwhelmed and lose their cool. <b>Things that might be tolerable individually combine into an unfathomable mess whose extent and ramifications seem beyond analysis. Market crises are chaotic, not orderly, and the multiplicity and simultaneity of contributing causes play a big part in making them so.</b>&rdquo;</p>
<p>I did an interview with good friends David Galland and Doug Casey of Casey Research yesterday. They are decidedly more bearish than I am, so wanted an &ldquo;optimist&rdquo; to sit on their panel. But they forced me to admit that some of my optimism depends on the probability of US political leaders doing the right thing. Depending on your opinion about that, you are more or less prone to think there is a crisis in our future. And while I like to think it is not me showing a home-town bias, I think Europe has worse problems and a tougher situation than the US. A crisis there is more likely, I think.</p>
<p>But whether you want to make it 50-50 to 70-30 or (pick a number), there is a reasonable prospect of another credit crisis. So what should you do?</p>
<p>First, think back to 2008. Were you liquid enough? Did you have enough cash? If not, then think about raising that cash now. When the crisis hits, you have to sell what you can for what you can get, not what you want for reasonable prices.</p>
<p>I am personally raising more cash in my business. I usually invest money as soon as I can. Now, I am still investing, and you too should still put money to work in places that you think have the potential to do well in a crisis. Go back and see what worked in 2008 and buy more of it! Long-only funds did not work. Those that were more nimble did.</p>
<p>In the next crisis, opportunities to buy assets on the cheap will grow, so having some cash will make it easier to buy things you want to own for the next 10-20 years, whether income-producing or just something you want for fun.</p>
<p>Think through your portfolio. In 2008 I watched investors liquidate solid funds, or sell off assets at fire-sale prices, because that was the only way they could raise cash, when that was the time to invest more, not redeem. Make sure you are the &ldquo;strong hand.&rdquo;</p>
<p>Understand, I am not saying sell your conviction stocks. I have some and am buying more. But no index funds, no long-only, unhedged funds. I make very specific choices when it comes to long-only investments that I am looking to hold over and beyond a ten-year horizon. And those are risks I want to take (at least today).</p>
<p>I do not want to own anything that looks like an index fund or long-only mutual fund. Think 2008. I want funds and managers that have an edge and have a hedge, preferably both.</p>
<p>I would not be long money-center bank stocks or bonds, not in the US and especially not in Europe. I have had private off-the-record conversations with Republican leaders. There is simply no willingness to do another TARP-like bailout of bondholders and shareholders. I believe them. As Hussman suggested, this time bondholders will lose. I just don&rsquo;t know which ones will be ready, and there are lots of other places to deploy assets. If you feel you have some special insight, then be my guest; but I just see too much risk for the potential reward, especially in large bank bonds that pay so little. That is not to say they are all equally bad &ndash; certainly not the regionals with less exposure to Europe. But do your homework.</p>
<p>(Caveat: I do think even the GOP leaders will have to cave in and allow the government to be &ldquo;debtor-in-possession&rdquo; of the too-big-to-fail banks we allowed to exist under the really bad financial bill called Dodd-Frank, which needs to be repealed and replaced. We have to preserve the system, but not shareholders and bondholders, who will lose this time.)</p>
<p>Think through your business. Banking relationships are not what they used to be. Spend time now getting commitments. Remember the odd spike in 2008 in bank lending? It was from credit lines being drawn down. But no one got new lines at the time. What can you do if sales get tough? What can you do to increase market share when your competitors start to pull back? The winners in 2008-09 were the companies that increased innovation and did not pull back (according to a Boston Consulting Group survey).</p>
<p>If you plan correctly, the next crisis will be an opportunity for you and not a personal crisis. And you will be better able to help those who need it.</p>
<p>A special note. In a few weeks I will be sending out an email that will contain a link to a totally free treasure trove of business and marketing ideas you can use to keep your business at the cutting edge, whether you are established are just starting out. It is one of those things I can do that costs me very little, but that sometime may mean a lot to you. I am just glad to be in the position to help a little.</p>
<p>I know I sound rather stark at times, but I really don&rsquo;t want you to dig a hole and get in and cover yourself up. I do not. While we are perhaps somewhat more cautious, we are also looking for ways to grow and be more aggressive here at my business. I will keep repeating: look for the opportunities. They are there. Just gauge your risk appropriately.</p>
<h5><strong>What Can You Do About the Weather?</strong></h5>
<p>The answer is, not very much, but you can prepare. I have arranged for my readers to get the latest copy of the <i>Browning Newsletter,</i> written by Evelyn Browning Gariss, who I think of as one of the world&rsquo;s greatest climatologists. Her letter is a monthly must-read for me, and it is a steal at $250 a year. You need to read it for a few months to get the feel for it, as you may find it full of new terms, but you&rsquo;ll soon get the hang of it. There are in fact patterns. And this winter we are sadly being set up for what may be a repeat of last year&rsquo;s weather in the Southern Hemisphere, and rain at the wrong time in the US, during harvest. You can read the latest issue at my website, <a href="http://www.johnmauldin.com/frontlinethoughts/browning-newsletter-0911">http://www.johnmauldin.com/frontlinethoughts/browning-newsletter-0911</a>. (You will need to type in your email address to get it.)</p>
<h5><strong>Europe, Houston, New York, and South Africa</strong></h5>
<p>I leave in a few weeks for a whirlwind trip to Europe (London, Malta, Dublin, and Geneva) and then back. A quick trip to Houston for a conference (<a href="https://www.webinstinct.com/streettalkadvisors/">https://www.webinstinct.com/streettalkadvisors/</a>) and then I fly to New York for the weekend, where I will be speaking at the Singularity Summit, which is October 15-16. This is an outstanding conference, and I am honored to be asked to speak. It is really a bunch of wild-eyed futurists (like your humble analyst) getting together to think about what the future holds for us. For two days I get to be an optimist, if only in the longer term! Ray Kurzweil is the guiding light, and he has assembled an all-star cast. You can learn more at <a href="http://www.singularitysummit.com/">www.singularitysummit.com/</a>. For those who can make it, I think you will come back amazed and more positive about the future of our world. And you can see videos of previous conference presentations at their website &ndash; well worth an evening or two or three, and the price is right. But if you can make the conference, you will enjoy the experience and meet new friends. And then I&rsquo;ll fly to South Africa for two nights, and head back home.</p>
<p>It is good to have Tiffani back in Dallas and home and in the office. She has been in Europe for most of the summer, staying with friends and working from there. Even with Skype, it&rsquo;s just not the same. And she did bring the granddaughter back with her! And one of the twins and her husband have moved back to Dallas, so 6 of 7 are now local. The other is coming soon, I hope! Dad likes to have his kids near.</p>
<p>It has been a very hectic week. Can I get busier? And computer issues have been a plague. To deal with it, we purchased two new HP laptops, and one will now be a mirror, so I will not go down if my computer fails. It is just too cheap not to do it, and lost time is frustrating and costly. I am amazed at what you can get for $1250: 8 gigs of RAM, a terabyte of memory &ndash; more power than I can use &ndash; cool 17-inch screens, a fingerprint reader camera, and I think there is even a grill attachment somewhere.</p>
<p>And speaking of grills, we did get a new one for Labor Day. About 30 people were here, and I spent most of the day cooking. It was time for fun and family and friends. I need more times like that to remind me of the real values in life, and why we will get through all this hassle. The future was in my home, and what a future it will be! My plan is to hang around a long time to see them enjoy it.</p>
<p>This Sunday Rich Yamarone (of Bloomberg) will be here to brave a family brunch gathering. Then Barry Habib shows up on Wednesday for a day-long planning session on a new venture, ending with a great meal somewhere. (This food theme keeps recurring!) Have a great week. And find some great food of your own! Enjoy life&rsquo;s pleasures!</p>
<p>Your actually losing weight in spite of the great food analyst,</p>
<p><em>John Mauldin</em></p>
<p><a href="mailto:John@FrontlineThoughts.com">John@FrontlineThoughts.com</a></p>